NEW YORK--(BUSINESS WIRE)--Aug. 7, 2006--AmerisourceBergen
Corporation (NYSE: ABC) and Kindred Healthcare, Inc. (NYSE: KND) today
announced that they have signed a non-binding letter of intent to
combine their respective institutional pharmacy businesses, PharMerica
Long-Term Care ("PharMerica LTC") and Kindred Pharmacy Services
("KPS"), into a new, independent, publicly traded company. The
transaction is intended to be tax-free to shareholders of both
AmerisourceBergen and Kindred.
The new company would be the second largest in the institutional
pharmacy services market. Based upon the six months ended June 30,
2006, annualized, unaudited revenues for the new company would be
approximately $1.9 billion, with a customer base of approximately
330,000 licensed beds in 41 states, and annualized unaudited earnings
before interest and income taxes ("EBIT") would be approximately $75
million. Preliminary synergy cost savings from the combination are
estimated to be approximately $30 million. The combination does not
include AmerisourceBergen's workers' compensation business, PMSI,
which is reported in its PharMerica segment, nor Kindred's hospital,
nursing center or contract rehabilitation businesses.
AmerisourceBergen currently provides pharmaceutical distribution
to both KPS and PharMerica LTC and under the letter of intent would
continue to provide those services to the new company. Kindred would
provide information systems support and some administrative support
services to the new company for a period of time.
Paul J. Diaz, Kindred President and Chief Executive Officer, said,
"This combination will create a national institutional pharmacy with
greater scale that will allow it to compete more effectively in the
marketplace, and will join two companies with the shared values of
focusing on customers, employees, and patients, while at the same time
unlocking greater value to our shareholders. After this transaction,
Kindred will be able to more effectively focus its resources and
capital on its hospital, nursing center and contract rehabilitation
businesses."
"This transaction is a huge win for patients, customers,
associates, suppliers and shareholders," said R. David Yost,
AmerisourceBergen Chief Executive Officer. "It will build on the best
of both organizations as the new company becomes a national force in a
growing market. This move will also allow AmerisourceBergen to
concentrate on its strategic focus of pharmaceutical distribution,
specialty pharmaceutical distribution and related services, and other
pharmaceutical supply channel services such as packaging."
Summary of Proposed Transaction:
- The combination is intended to be a tax-free transaction which
would result in AmerisourceBergen and Kindred shareholders
each holding 50 percent of the shares of the new company.
- In connection with the transaction, PharMerica LTC and KPS
will each make a one-time cash distribution, intended to be
tax-free, of approximately $150 million to their respective
parent companies, subject to potential adjustments at the
closing of the proposed transaction.
- PharMerica LTC and KPS will fund the distribution by borrowing
approximately $150 million each for a total of $300 million of
new debt. The new company will assume this debt as part of the
proposed merger. This new debt would be the only long-term
debt the new company assumes from the parent companies,
leaving it with significant financial flexibility.
- After the cash distribution, each of the institutional
pharmacy businesses would be separately spun off to
AmerisourceBergen and Kindred shareholders, to be followed
immediately by a stock-for-stock merger which would result in
AmerisourceBergen and Kindred shareholders each owning 50
percent of the new company.
- Deutsche Bank Securities is acting as financial adviser to
AmerisourceBergen and Lehman Brothers is acting as Kindred's
financial adviser.
- The parties have engaged Heidrick & Struggles to conduct a
national search for a chief executive officer and chief
financial officer to lead the proposed new public company.
AmerisourceBergen and Kindred expect to sign a definitive
agreement on or about September 30, 2006, and anticipate completion of
the transaction in the first calendar quarter of 2007. In addition to
entering into a definitive agreement, this transaction requires
regulatory review by the Federal Trade Commission, and the Securities
and Exchange Commission, and a favorable determination by the Internal
Revenue Service.
Mr. Yost and Mr. Diaz added, "We are incredibly excited about the
growth prospects for the new company and the great opportunities to
gain additional business through organic sales and selective
acquisitions. The newly created company will have ample synergy
opportunities and the potential to significantly improve upon the
automation of its packaging and distribution processes and the
deployment of new technology offerings to its customers."
Six Months Ended June 30, 2006 (unaudited) (dollars in millions)
----------------------------------------------------------------------
PharMerica KPS Combined
LTC
---------- ------- --------
Revenues $609.5 $317.1 $926.6
EBIT *$18.0 *$19.5 $37.5
Customer beds at end of period 234,600 95,300 329,900
*Includes the impact of allocated parent corporate expenses totaling
$1.8 million for PharMerica LTC and $6.1 million for KPS.
The proposed transaction will proceed only if the parties sign a
definitive agreement and if all conditions to completion, including
regulatory approvals, occur. There can be no assurance that a
definitive agreement will be signed or, if a definitive agreement is
signed, that all conditions to completion will be met.
Conference Call
AmerisourceBergen and Kindred will hold a joint conference call to
discuss the proposed transaction, today, Monday, August 7, 2006, at
8:30 a.m. Eastern Daylight Time. Participating in the conference call
from AmerisourceBergen will be R. David Yost, Chief Executive Officer,
and Michael D. DiCandilo, Executive Vice President and Chief Financial
Officer, and from Kindred will be Paul J. Diaz, President and Chief
Executive Officer and Richard A. Lechleiter, Executive Vice President
and Chief Financial Officer.
To access the live conference call via telephone:
Dial in: 612-326-1027, no access code required.
To access the live webcast:
Go to the Quarterly Webcasts section on the Investor Relations
page at http://www.amerisourcebergen.com or
http://www.kindredhealthcare.com.
A replay of the telephone call will be available from 2:30 p.m.
August 7, 2006 until 11:59 p.m. August 14, 2006. The Webcast replay
will be available for 30 days.
To access the replay via telephone:
Dial in: (800) 475-6701 from within the U.S., access code: 838558
(320) 365-3844 from outside the U.S., access code: 838558
To access the archived webcast:
Go to the Quarterly Webcasts section on the Investor Relations
page at http://www.amerisourcebergen.com or
http://www.kindredhealthcare.com.
About AmerisourceBergen
AmerisourceBergen (NYSE:ABC) is one of the world's largest
pharmaceutical services companies serving the United States and
Canada. Servicing both pharmaceutical manufacturers and healthcare
providers in the pharmaceutical supply channel, the Company provides
drug distribution and related services designed to reduce costs and
improve patient outcomes. AmerisourceBergen's service solutions range
from pharmacy automation and pharmaceutical packaging to pharmacy
services for skilled nursing and assisted living facilities,
reimbursement and pharmaceutical consulting services, and physician
education. With more than $59 billion in annualized revenues,
AmerisourceBergen is headquartered in Valley Forge, PA, and employs
more than 13,000 people. AmerisourceBergen is ranked #27 on the
Fortune 500 list. For more information, go to
www.amerisourcebergen.com.
About Kindred Healthcare
Kindred Healthcare, Inc. (NYSE: KND), is a Fortune 500 healthcare
services company, based in Louisville, Kentucky, with annualized
revenues of $4.3 billion that provides services in 582 locations in 39
states. Kindred through its subsidiaries operates long-term acute care
(LTAC) hospitals, skilled nursing centers, institutional pharmacies
and a contract rehabilitation services business, Peoplefirst
Rehabilitation Services, across the United States. Kindred's 56,000
employees are committed to providing high quality patient care and
outstanding customer service to become the most trusted and respected
provider of healthcare services in every community we serve. For more
information, go to www.kindredhealthcare.com.
AmerisourceBergen Forward-Looking Statements
This news release may contain certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements
are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained in the forward-looking
statements. The forward-looking statements herein include statements
addressing management's views with respect to future financial and
operating results and the benefits, efficiencies and savings to be
derived from the Company's integration plan to consolidate its
distribution network. The following factors, among others, could cause
actual results to differ materially from those described in any
forward-looking statements: competitive pressures; the loss of one or
more key customer or supplier relationships; customer defaults or
insolvencies; changes in customer mix; supplier defaults or
insolvencies; changes in pharmaceutical manufacturers' pricing and
distribution policies or practices; adverse resolution of any contract
or other disputes with customers (including departments and agencies
of the U.S. Government) or suppliers; regulatory changes; changes in
U.S. government policies (including reimbursement changes arising from
the Medicare Modernization Act); declines in the amounts of market
share rebates offered by pharmaceutical manufacturers to the
PharMerica long-term care business, declines in the amounts of rebates
that the PharMerica Long-Term Care business can retain, and/or the
inability of the business to offset the rebate reductions that have
already occurred or any rebate reductions that may occur in the
future; fluctuations in market interest rates; operational or control
issues arising from the Company's outsourcing of information
technology activities; the Pharmaceutical Distribution segment's
ability to continue to successfully transition its business model to
fee-for-service; success of integration, restructuring or systems
initiatives; fluctuations in the U.S. dollar - Canadian dollar
exchange rate and other foreign exchange rates; economic, business,
competitive and/or regulatory developments in Canada, the United
Kingdom and elsewhere outside of the United States; acquisition of
businesses that do not perform as we expect or that are difficult for
us to integrate or control; and other economic, business, competitive,
legal, regulatory and/or operational factors affecting the business of
the Company generally. Certain additional factors that management
believes could cause actual outcomes and results to differ materially
from those described in forward-looking statements are set forth (i)
elsewhere in this report, (ii) in Item 1 (Business) under the heading
"Certain Risk Factors" in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2005 and elsewhere in that report
and (iii) in other reports filed by the Company pursuant to the
Securities Exchange Act of 1934.
Kindred Healthcare Forward-Looking Statements
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements regarding
Kindred's expected future financial position, results of operations,
cash flows, financing plans, business strategy, budgets, capital
expenditures, competitive positions, growth opportunities, plans and
objectives of management and statements containing the words such as
"anticipate," "approximate," "believe," "plan," "estimate," "expect,"
"project," "could," "should," "will," "intend," "may" and other
similar expressions, are forward-looking statements. Statements in
this press release concerning the new company's business outlook or
future economic performance, anticipated profitability, revenues,
expenses or other financial items, anticipated cost synergies,
economies of scale and product or service line growth, together with
other statements that are not historical facts, are forward-looking
statements reflecting the best judgment of Kindred based upon
currently available information.
Such forward-looking statements are inherently uncertain, and
stockholders and other potential investors must recognize that actual
results may differ materially from Kindred's expectations as a result
of a variety of factors, including, without limitation, those
discussed below. Such forward-looking statements are based upon
management's current expectations and include known and unknown risks,
uncertainties and other factors, many of which Kindred is unable to
predict or control, that may cause Kindred's actual results or
performance to differ materially from any future results or
performance expressed or implied by such forward-looking statements.
These statements involve risks, uncertainties and other factors
discussed below and detailed from time to time in Kindred's filings
with the Securities and Exchange Commission.
In addition to the factors set forth above, other factors that may
affect Kindred's plans or results include, without limitation, (a)
Kindred's and AmerisourceBergen's ability to reach definitive
agreements and the receipt of all required regulatory approvals and
the satisfaction of other closing conditions to the transactions; (b)
Kindred's ability to operate pursuant to the terms of its debt
obligations and its master leases with Ventas, Inc. (NYSE:VTR); (c)
the risks and uncertainties arising from and related to the rent reset
process, including the appraisal process, pursuant to the master
leases; (d) the risks and uncertainties associated with the court
action presently pending between Kindred and Ventas related to the
production of Kindred's third party appraisals prepared for the rent
reset process; (e) Kindred's ability to meet its rental and debt
service obligations; (f) adverse developments with respect to
Kindred's results of operations or liquidity; (g) Kindred's ability to
attract and retain key executives and other healthcare personnel; (h)
increased operating costs due to shortages in qualified nurses,
therapists and other healthcare personnel; (i) the effects of
healthcare reform and government regulations, interpretation of
regulations and changes in the nature and enforcement of regulations
governing the healthcare industry; (j) changes in the reimbursement
rates or methods of payment from third party payors, including the
Medicare and Medicaid programs, changes arising from and related to
the Medicare prospective payment system for long-term acute care
hospitals, including the final Medicare payment rules issued on May 2,
2006, the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, and changes in Medicare and Medicaid reimbursements for
Kindred's nursing centers; (k) national and regional economic
conditions, including their effect on the availability and cost of
labor, materials and other services; (l) Kindred's ability to control
costs, particularly labor and employee benefit costs; (m) Kindred's
ability to successfully pursue its development activities and
successfully integrate new operations, including the realization of
anticipated revenues, economies of scale, cost savings and
productivity gains associated with such operations; (n) the increase
in the costs of defending and insuring against alleged professional
liability claims and Kindred's ability to predict the estimated costs
related to such claims; (o) Kindred's ability to successfully reduce
(by divestiture of operations or otherwise) its exposure to
professional liability claims; (p) Kindred's ability to successfully
dispose of unprofitable facilities; and (q) Kindred's ability to
ensure and maintain an effective system of internal controls over
financial reporting. Many of these factors are beyond Kindred's
control. Kindred cautions investors that any forward-looking
statements made by Kindred are not guarantees of future performance.
Kindred disclaims any obligation to update any such factors or to
announce publicly the results of any revisions to any of the
forward-looking statements to reflect future events or developments
CONTACT: For AmerisourceBergen:
Michael N. Kilpatric, 212-546-8873
Vice President, Corporate & Investor Relations
or
For Kindred Healthcare:
Susan E. Moss, 212-546-8896
Vice President of Corporate Communications
SOURCE: AmerisourceBergen Corporation and Kindred Healthcare, Inc.